By the summer of 2005, it was clear that Skype was going to be big. Really big. The company was about to be bought by eBay for a cool $2.6bn, and was well on the way to reaching 100 million users. The offices were abuzz; everyone was excited about being part of this unfolding success story.
Well, not quite everyone. In fact, two executives found themselves with an even more captivating proposition. Eric Partaker and Dan Houghton decided to quit the business to launch a new start-up – a Mexican restaurant chain for the UK market, marrying fast food convenience with fresh, authentic cooking. Given Skype’s subsequent explosion, many would question the sanity of this decision.
However, Houghton and Partaker are doing pretty well for themselves. Their chain of restaurants, Chilango, is now turning over £3.5m a year – not bad for a company which only recently celebrated its fourth birthday. Partaker has earned an appearance as an expert judge on The Apprentice, and Chilango was named ‘Best New Concept’ at the Retailer of the Year awards in 2010.
But where did this concept come from? Well, in fact it was born in the rather incongruous
location of a Mexican restaurant in Norway. Partaker, who was raised in America to a Norwegian father, was working in the country of his ancestors, and was appalled by the quality of Mexican food he encountered there.
Having been raised in Chicago, home to America’s second-largest Mexican community, Partaker had always loved Mexican food; now he smelled a business opportunity. Although his move to Skype forced the idea of a Mexican chain onto the backburner for a while, by 2005 he was ready to take it forward.
Partaker takes up the story: “Dan (Houghton) and I had a pact that, if either of us had an idea, we’d let the other one know. He was really captivated by it, so we decided to quit Skype and we put in £30,000 of our own cash, supported by seven friends and former colleagues, who put up £85,000. HSBC matched us with a loan guarantee of £145,000, so we were ready to go.”
Upon quitting their jobs in 2005, the dynamic duo embarked on a tour of Mexico and America to work out their brand and master recipes. Many would have left Skype with trepidation, but Partaker departed with inspiration.
“It wasn’t tough (to leave) because Dan and I got a lot out of Skype, which could be immediately applied to our own venture. Skype was built around a few key principles which we’ve applied to Chilango.
“For example, both companies spent the majority of their time up-front on the core product. For Skype it was the call technology, for us it was the food. We spent a couple of years tinkering with the menu and ingredients in the beginning.”
After two years of tweaking the core offering, the first branch of the venture, originally called Mucho Mas, opened in Islington in 2007. Partaker says they spent around £290,000 in establishing that initial outlet. The biggest single expense, at around £110,000, was the premium on the Islington lease; the remainder went on decorating the premises, hiring staff, and registering the brand.
For inspiration, Partaker and Houghton looked to America’s long-established successful Mexican fast-food chains. Their concept was based on a customer-facing production line, with reasonably priced meals (averaging around £5) and staff focused on meal preparation rather than table service. Freshness was designed into every meal; Partaker and Houghton decided, for example, that the chicken must be marinated overnight, the pork should be braised and the guacamole should be continually mashed throughout the day.
In their quest for fresh ingredients, the founders entered into sourcing agreements with Mexican farmers for foods such as chillis and tomatillos. According to Partaker, “buying the ingredients locally meant you were paying more than you should, for quality that was less than it should be. We thought “why not cut the middle-men out?”
A rigorous training programme was soon established, giving staff a comprehensive tour of each station, and the founders established a share option scheme for senior management. Partaker says “we’d rather have a smaller piece of something that has the potential to be the absolute best,” and believes the share options have helped to turn staff into stakeholders, enhancing the vibrancy of the brand and giving senior employees a personal interest in growing the business.
The model worked instantly, and the Islington restaurant was soon doing a roaring trade. Investors began to take notice; within five months, Mucho Mas had raised £1.1m from Venrex Investment Management and Ambient Sound Investments, based on its early success.
But still, the founders weren’t happy. Right from the outset, they had sought customer feedback whenever possible – and the customers were telling them they needed a punchier, more energetic brand.
So, in the autumn of 2008, the co-founders took their branding agency, i-am, to Mexico City. According to Partaker, their experiences “became a fountain of inspiration”. Invigorated by the Hispanic hustle-and-bustle, the i-am team suggested a new name – Chilango, a slang term for someone who moves to Mexico City for fun and adventure. Partaker was instantly hooked.
Using some of the unspent investment from Venrex and Ambient, the founders laid plans for a second branch, completely different from the Islington original. The new restaurant, on Fleet Street, would be imbued with pulsing energy in every detail, from the graffiti and neon signs on the walls to the magenta stools around the dining tables. New hires were picked out for their energy and individuality, a policy which remains to this day – Partaker elaborates: “if you have blue hair we’ll consider you, if you’re a good fit in terms of attitude of course!”
The rebrand, completed in December 2008, brought instant success. Within four months, sales had doubled to a weekly value of £25,000. Advertising spend remained minimal, but word-of-mouth sent footfall rocketing; turnover in the year to September 2010 comfortably exceeded £3m.
Buoyed by a second investment round totalling £3m, Chilango expanded into two new premises. The first opened at Kent’s Bluewater Shopping Centre last March, and the second, on Chancery Lane, launched to the public on May 5 this year, with a party to coincide with Mexico’s famous Cinco De Mayo festival – part of an ongoing strategy to build brand awareness with offers, games and competitions via the conduit of social media.
Having recently closed Chilango’s first regional outlet, in Sheffield, following months of poor performance, Partaker simply intends to “continue opening one restaurant at a time. You don’t want to do anything that compromises the brand. However we’re built for growth, and we’re actively looking for more locations in London.
“Sheffield taught us to understand what it is that makes your business a success. To eliminate risk, you should try to replicate that model as quickly as possible.”
This brief statement encapsulates the Chilango mission: Partaker refuses to be wedded to a grand strategy – he says that, “once a business plan is written, it kind of goes out of the window”. Instead, he plays what’s in front of him, using customer feedback to move with the market and tailor his brand accordingly.
Like one of those Chilangoes moving to the big city in search of excitement, Partaker is content to live in the now – happy in the belief that, if you pour passion and commitment into the present, the future will take care of itself.